In every large city, city workers get a pension when they retire. In a few cities, workers pay into their retirement accounts, but in most the annual contribution is made by the city, from tax revenue.
Well, except for Democrat-ruled cities. Politicians in those cities would much rather spend the money to buy votes, so they pay less into the retirement funds than what the actuarial analysts say is needed to pay out the agreed amount when the worker retires.
"Wait, won't that mean the needed funds won't be there to pay the pensions?"
Congratulations, you must be a Republican. Dems don't seem able to crack that mystery.
"But if the payments are required (somehow), how the hell do pols get away with having their city contribute less than the amount the experts calculate is needed?"
You're
way too smart to be a Democrat. It's simple: Annual retirement contributions are invested in a array of things, and there's an average rate of return. Because of the miracles of compound growth, 30 years later the amount paid in has tripled or quadrupled, depending on that "rate of return." With me so far? Good.
Now: The higher the estimated ROR used by the experts to calculate the city's annual contribution to retirement accounts, the less cash the city needs to contribute each year, since the investment is growing faster on its own.
You can already see where this is headed: To free up cash to buy votes, the HDIC (head Dem in charge) orders the city's retirement managers to re-calculate the required contribution using a rate of return that's...um...absurdly optimistic. And no one on the council says "That's fraud." Which, of course, is exactly what it is.
The actuarial folks diplomatically note that the rate is optimistic, but they do as they're ordered, for fear of being fired or not getting a merit raise or whatever. Result: "Unfunded pension liability."
Chicago has a gazillion public employees. As of the end of last year the city of Chicago was about $28 billion short of having pensions fully funded.
Now: You don't live in Chicago, so how does this affect you?
Like this: In Chicago, what we call city council members are called "aldermen" (although a move is afoot to ban that word and replace it with "alderpersons").
And Alderman Ameya Pawar recently proposed that the city should pay all residents a "universal basic income," paid by taxpayers.
Yes, this communist rat-bastard wants da gruberment to cut everyone a monthly check--sorta like "super welfare," except residents would get it even if they were making above the cutoff for welfare. And Pawar has introduced a bill to test the program by giving 1,000 families $500 per month, no questions asked. Oh, and the communists cleverly, cunningly DON'T call this payment welfare but a..."stipend." Cuz that's a word unfamiliary to most low-info voters so has no baggage. Plus it's associated with helping college students pay for college, so who could be against something like that, right?
The bill already has the backing of the36 of of the city lawmakers, so is guaranteed to have enough votes to pass.
Of course you can already predict what will happen: First, social-justice snowflakes will scream that giving the same amount to a family as to a single person is unfair to families, thus discrimination, so the final proposal will pay extra for kids, whether biological or not. Next, snowflakes will wail that $500 bucks a month isn't enough, so that base amount will double or triple.
Now, what does that have to do with unfunded pensions?
Okay, as of 2010 there were
1,194,337 households within the city limits of
Chicago. (More than half the population of the entire state lives
in the "Chicago metropolitan area.") So paying a thousand bucks a month to every household in Chicago will cost the city roughly $14 billion per year. So when the city finally has to figure out how to tell retired employees their pensions aren't funded, they'll have a great excuse: "We couldn't have foreseen that the demand for a 'Universsal Basic Income' would be so great, and that messed up all our finances!"
And when it comes down to who gets cut, there'll be about two million people--half of them members of the most politically protected group in the country--who'll be screaming at the pols NOT to reduce the monthly checks.
So what will happen next? The city will start schmoozing the federal government to bail out their ghastly-stupid, self-serving, idiotic, moronic, self-serving (yes, I know that's twice now) decisions. And if a Democrat is president, it's a done deal.
Which means YOU, today's students, will have your tax dollars effectively stolen by the Democrats in D.C. to keep the Chicago Democrat machine in power for your entire lifetime.
Oh, do I hear a bunch of you saying "That's ridiculous! First, no rational city council would ever pass such a thing. Second, the courts would quickly rule it unconstitutional. Third, if it did pass, city leaders would set the monthly payments at a much lower level, one the city could afford."
Ah, I see you just arrived on the planet and are totally unfamiliar with the way things work here.
No matter. Enjoy your stay. Meanwhile for the rest of you: The proposal already has a majority in the council, so passage is assured. Of course that's just for the pilot program, so there's a chance Rahm might...nah. More on that below.
Okay, how about the courts? Well since this isn't a federal program, it'll be almost impossible to get a federal judge to even look at it. And Illinois state courts? You gotta' be kiddin,' right? Buncha' corrupt clowns.
How about the possibility that city leaders would adopt the program but at a modest level that the city could afford? After all, Rahm Emanuel (former Obama chief of staff) is very sharp when
it comes to running the city's finances properly,..... Sorry, couldn't
do that with a straight face. Rahm is the guy who coined the infamous
phrase "Never let a crisis go to waste" (which, interestingly, was a
tactic used heavily by Obama) and you can expect he'll hug this proposal so tight he may
strain a muscle.
Finally, what are the chances a future Dem president will order the federal government to bail the city out? Zero. Dems can't win without Illinois. And with the population of the city at 2.7 million, no Dem pol wants to anger Chicago residents. So the bailout is a certainty.
Okay, one last possible saver would be fed courts stopping a pres from doing that. But since the Supreme Court ruled in favor of Obamacare, that bridge has already been crossed. Also, the feds bailed out New York City back in the late 1970's (forgot that, did ya?) so again, no clear federal barrier.